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It has been about a month since the last earnings report for Johnson & Johnson (JNJ). Shares have added about 7.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Johnson & Johnson due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent catalysts for Johnson & Johnson before we dive into how investors and analysts have reacted as of late.
J&J’s second-quarter 2025 earnings came in at $2.77 per share, which beat the Zacks Consensus Estimate of $2.66. Earnings, however, declined 1.8% from the year-ago period due to interest associated with incremental debt from the Intra-Cellular acquisition and gross profit erosion from Stelara.
Adjusted earnings exclude intangible amortization expense and special items. Including these items, reported earnings were $2.29 per share, up 18.7% year over year.
Sales came in at $23.74 billion, which also beat the Zacks Consensus Estimate of $22.80 billion.
Sales rose 5.8% from the year-ago quarter, reflecting an operational increase of 4.6% and a positive currency impact of 1.2%. Organically, excluding the impact of acquisitions/divestitures and currency, sales rose 3.0% on an operational basis.
The Stelara loss of exclusivity (“LOE”) hurt revenue growth by 710 basis points in the quarter.
Second-quarter sales in the domestic market rose 7.8% to $13.54 billion. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, domestic sales rose 5.0% in the quarter.
International sales rose 3.2% on a reported basis to $10.2 billion, reflecting an operational increase of 0.6% and a positive currency impact of 2.6%. Excluding the impact of all acquisitions and divestitures on an adjusted operational basis, international sales rose 0.4% in the quarter.
J&J’s Innovative Medicines segment sales rose 4.9% year over year to $15.2 billion, reflecting a 3.8% operational increase and a positive currency impact of 1.1%. Excluding the impact of all acquisitions and divestitures and currency on an adjusted operational basis, worldwide sales rose 2.4%. Innovative Medicines sales beat the Zacks Consensus Estimate of $14.55 billion as well as our model estimate of $14.50 billion.
Higher sales of key products such as Darzalex, Tremfya and Erleada due to strong market growth and share gains drove the segment’s growth. Xarelto and Simponi/Simponi Aria sales also rose in the quarter. New drugs like Carvykti, Tecvayli, Talvey, Rybrevant and Spravato contributed significantly to growth. The sales growth was partially dampened by lower sales of Imbruvica and generic/biosimilar competition to drugs like Stelara and Zytiga. Stelara LOE negatively impacted Innovative Medicines segment growth by 1170 basis points.
In the Innovative Medicines segment, sales in the United States rose 7.6%, while outside U.S. sales declined 1.6% on an operational basis.
Oncology
Darzalex sales rose 23.0% year over year to $3.54 billion in the quarter, driven by continued share gains across all lines of therapy, particularly the front-line setting, as well as market growth. Sales beat the Zacks Consensus Estimate of $3.45 billion and our model estimate of $3.44 billion.
Imbruvica sales declined 4.5% to $735.0 million due to rising competitive pressure in the United States, due to new oral competition and the impact of Medicare Part D redesign. Imbruvica sales were, however, better than the Zacks Consensus Estimate of $697.0 million and our estimate of $694.8 million.
Erleada generated sales of $908.0 million in the quarter, up 23.4% year over year, driven by share gains and market growth. Erleada sales beat the Zacks Consensus Estimate of $853.0 million as well as our model estimate of $903.9 million.
New drug Carvykti recorded sales of $439.0 million compared with $369 million in the previous quarter, driven by share gains and continued capacity expansion. Another new drug, Tecvayli, recorded sales of $166.0 million in the quarter, up 23.1% year over year.
Sales of Talvey were $106 million, up 55.0% year over year. Tecvayli and Talvey’s growth was driven by strong launches in the relapsed-refractory setting.
Rybrevant plus Lazcluze sales were $179 million compared with $69 million in the year-ago quarter, driven by a strong launch trajectory.
Zytiga sales declined 11.6% to $145.0 million in the quarter due to generic competition.
Immunology
Stelara sales declined 42.7% to $1.65 billion in the quarter due to the impact of biosimilar competition and Part D redesign. While U.S. sales of Stelara declined 41.9%, international sales declined 44.2% in the quarter. Stelara sales missed the Zacks Consensus Estimate as well as our model estimates of $1.88 billion.
Several biosimilar versions of Stelara have been launched in the United States in 2025. According to patent settlements and license agreements, Amgen, Teva, Samsung Bioepis/Sandoz and some other companies have already launched Stelara biosimilars this year. Stelara biosimilar competition is expected to accelerate throughout 2025 as the number of biosimilar entrants increases.
Tremfya recorded sales of $1.19 billion in the quarter, up 31.0% year over year, driven by strong market growth across all indications (including newly launched IBD indications) and overall market growth, partially offset by the impact of Medicare Part D redesign. Tremfya sales beat the Zacks Consensus Estimate of $1.08 billion as well as our model estimate of $1.09 billion.
Simponi/Simponi Aria sales rose 28.6% to $690.0 million. Sales of Remicade rose 15.9% in the quarter to $455.0 million.
Neuroscience, PH and Other Drugs
In neuroscience, Spravato recorded sales of $414.0 million, up 53.3% year over year, driven by increased physician and patient demand. Caplyta, added from the Apil acquisition of Intra-Cellular Therapies, recorded sales of $211 million in the quarter. Invega Sustenna/Xeplion/Invega Trinza/Trevicta sales declined 5.9% to $992.0 million in the quarter.
PH drug Uptravi recorded sales of $476.0 million, up 11.7% year over year. Another PH drug, Opsumit, recorded sales of $582.0 million, up 6.4% year over year.
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Xarelto sales rose 5.6% in the quarter to $621.0 million.
Prezista sales declined 9.4% to $396.0 million.
MedTech segment sales came in at $8.54 billion, up 7.3% from the year-ago period, including an operational increase of 6.1% and a positive currency impact of 1.2%. MedTech segment sales beat the Zacks Consensus Estimate of $8.25 billion as well as our model estimate of $8.31 billion.
Excluding the impact of all acquisitions and divestitures, and currency, on an adjusted operational basis, worldwide sales rose 4.1%, driven by strong momentum in Cardiovascular, Surgery and Vision.
In the MedTech segment, sales rose 8.0% in the United States and 4.1% outside of the United States on an operational basis. The MedTech business improved from the first-quarter levels, driven by the newly acquired cardiovascular businesses, Abiomed and Shockwave, as well as in Surgical Vision and wound closure in Surgery. Moreover, improvements in J&J’s electrophysiology business also drove the sequential growth.
However, the company continues to face headwinds in China. Sales in China were hurt by the impact of the VBP program.
Cardiovascular (previously Interventional Solutions) sales grew 23.5%, driven by strong growth in electrophysiology and higher sales of Abiomed and Shockwave. The electrophysiology business improved significantly from the first quarter, driven by electro-anatomical mapping procedure volumes and increased Varipulse ablation catheter adoption and utilization. The electrophysiology business is expected to continue to improve.
Worldwide Surgery rose 2.7% as growth in wound closure and biosurgery offset the impact of competitive pressure in energy and endocutters and VBP issues in China. Worldwide orthopedics declined 0.3% due to competitive pressures, the transformation program and China VBP. Worldwide Vision rose 6.5%, driven primarily by contact lenses as well as almost double-digit growth in Surgical Vision.
The company raised its sales expectations for 2025 by around $2.0 billion at the mid-point to reflect a strong operational performance coupled with currency tailwinds.
The sales guidance was raised from a range of $91.0 billion-$91.8 billion to $93.2 billion-$93.4 billion.
The sales range indicates growth in the range of 5.1%-5.6% versus the prior expectation of 2.6%-3.6%. Operational sales growth is expected in the range of 4.5% – 5.0% (previously 3.3%-4.3%).
Adjusted operational sales (excluding currency impact, acquisitions/divestitures) growth is expected in the range of 3.2%-3.7% (previously 2.0%-3.0%).
The revenue figures exclude revenues from COVID-19 vaccine sales. The guidance also does not include the potential impact of the “Most Favored Nation” concept.
In 2025, J&J expects growth in the Innovative Medicine segment despite the loss of exclusivity of Stelara, and negative impact of the Part D redesign. The growth is expected to be driven by its key products, such as Darzalex, Tremfya, Spravato and Erleada as well as new drugs like Carvykti, Tecvayli and Talvey and new indications, including Tremfya in IBD and Rybrevant in non-small cell lung cancer.
In the MedTech segment, increased adoption of newly launched products in Cardiovascular, Surgery and Vision are likely to drive growth. However, China will continue to be a headwind in 2025. Sales are expected to be higher in the second half than the first half as the business moves past tougher first-half comps and new products gain momentum throughout 2025.
J&J expects operational sales growth in both the Innovative Medicine and MedTech segments to be higher in the second half than in the first. While newly launched products should drive better growth in Innovative Medicines segment in the second half, the MedTech segment may benefit from new products and easier comps.
The adjusted earnings per share guidance was raised from a range of $10.50-$10.70 to $10.80-$10.90 driven by top-line strength, the favorable impact of foreign currency and lowered tariff impact. On an operational, constant-currency basis, adjusted earnings per share are expected to increase in the range of 8.2%-9.2% (previously 5.2% to 7.2%).
The guidance range includes tariff costs as well as dilution from the Intra-Cellular Therapies acquisition.
In 2025, J&J estimates tariff-related costs of approximately $200 million, lower than the prior estimate of $400 million given on the first-quarter conference call. The tariff costs are exclusively related to its MedTech unit.
On an operational, constant-currency basis, adjusted earnings per share are expected to increase in the range of 6.5% – 7.5% (previously 5.2% to 7.2%).
Adjusted pretax operating margin is still expected to improve by approximately 300 basis points, driven by cost savings and reduced acquired IPR&D costs.
The company now projects net interest expense between $0 million and $100 million. Earlier, the company had guided for a net interest expense between $100 million and $200 million. Adjusted tax rate is expected to be approximately 17% to 17.5%.
In the past month, investors have witnessed a upward trend in estimates review.
Currently, Johnson & Johnson has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock has a grade of B on the value side, putting it in the top 40% for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Johnson & Johnson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
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